There was a time when anyone who mattered in New Delhi&rsquo;s economic policymaking circles and Mumbai&rsquo;s financial and business circles considered it a privilege and fashionable to spend the last few days of January in a snow-bound Swiss village, rubbing shoulders with business, political and thought leaders from around the world. No longer. By opting to opt out of leading the Indian delegation to Davos this year, Union Finance Minister Pranab Mukherjee has made a telling point. Not showing up at Davos won&rsquo;t make a difference.

Does Davos matter?

Business Standard

Any vehicle that has one person&rsquo;s leg on the accelerator and another&rsquo;s on the brake can only move in jumps and starts. That is probably what is beginning to happen, with New Delhi&rsquo;s leg on the spending accelerator and RBI&rsquo;s leg on the monetary brake. The burden of the January 25 policy statement is that RBI is telling North Block to go easy on the accelerator, if it has to resist slamming the brakes.

Mumbai warns Delhi

The Right to Information (RTI) Act has done a lot of good things for Indian democracy, but it seems to have done some bad things too. For example, making public the list of 1,300 nominations for this year&rsquo;s annual Padma awards, the final list being announced by the government on the eve of the Republic Day, takes a large part of the shine and mystique off the awards. Time was when recipients of the awards and their family, friends and admirers would all celebrate the award and rejoice in the national acclaim. Today, however, the procedure has been made so transparently bureaucratic that it must feel like being selected for a government job! To a great extent, this state of affairs has been brought upon the Padma by its dilution over the years. It was always the case that while these awards were given in large part to distinguished persons, the sycophants of the dispensation in power and an assortment of wheelers and dealers also managed to get their names listed.

The wilting Padma

Estimating black money has been a long time preoccupation of economists and tax collectors in India. Several books have been written and several government reports prepared. It is possible to suggest that the policy disincentives that may have contributed to black money generation, like high tax rates, have been moderated, if not eliminated, and that the incentive to declare income has gone up since the beginning of tax and policy reform in the 1990s.

Black money black hole

A churning is taking place in the Indian software industry. Successive slowdowns and upturns through the last decade have separated the men from the boys. The leaders that have thereby emerged have put a big distance between them and the medium-sized firms with not much of a future for the latter.

Churning in software

Naukri.com&rsquo;s monthly Job Speak index for December is notable because it bucked a seasonal trend by actually recording a growth over November. Although the last month of the year usually sees a dip in hiring owing to the holiday season, this year the index was described as &ldquo;stable&rdquo;. Apart from telecom, ITeS and banking, which saw the usual dip, hiring across all sectors was as robust as ever. This suggests that India is firmly back on the growth track and the job market and salaries are expanding exponentially. The bad news: India is headed for a talent crunch. The second point represents much more than just a headache for the HR managers in corporations. The skills gap is no longer one of India&rsquo;s many problems: it is reaching crisis proportions and could well become as critical as land acquisition and infrastructure shortages in constraining growth. The shortage, as any corporation will attest, is universal.

Jobs and skills

India&rsquo;s external debt, as per half yearly balance of payments statistics released by the finance ministry, was $296 billion, a year-on-year increase of 13 per cent. While long-term debt increased by 9.5 per cent to $230 billion, short-term debt registered a sharp increase of 26 per cent to $66 billion. The total external debt increased by an absolute amount of $33.5 billion, of which $6.3 billion (roughly 19 per cent) could be ascribed to a &ldquo;valuation effect&rdquo; arising due to the depreciation of the dollar against other major international currencies. The impact of dollar devaluation on India has expectedly been sharp, given that over half of India&rsquo;s external debt is dollar denominated. External Commercial Borrowings (ECBs), mainly by the Indian corporate sector seeking to benefit from the arbitrage between domestic and international interest rates, are an important reason for the rapidly increasing external debt.

The other debt

With the Niira Radia tapes controversy in India, Ratan Tata and other leading personalities have asked people to respect their &ldquo;right to privacy.&rdquo; The situation is peculiar since the government is the sole-owner of the tapes, and it is not clear who in the government was responsible for leaking them. Many argue that the information released has no relevance to the purpose of gathering such information &mdash; an income tax-related investigation on Radia.

Somik Raha: What price privacy?

What a shame that in the end it was left to the Marathi language television channels to pay tribute to Pandit Bhimsen Joshi. Bhimsen Joshi was born in what is now Karnataka, died in Maharashtra, and learnt his first formal lessons in Hindustani classical music in Gwalior, which is now in Madhya Pradesh. He lived and learnt from gurus as far away from home as Kolkata and Jalandhar. Pandit Bhimsen Joshi belonged to India. His voice was a gift of the Gods, his life was of his own making.

A pan-Indian voice

The new Union minister for petroleum and natural gas Jaipal Reddy can implement the brightest ideas from the smartest bureaucrats and yet the root of the problem that resulted in the murder of Mr Yashwant Sonawane, a district official in Maharashtra who sought to curb the adulteration of petrol by the kerosene mixing mafia, will not be touched unless India&rsquo;s fuel pricing policy is shaped by the logic of simple economics. Various estimates have been provided in the past few days of the size of the domestic black market in kerosene. Some put it upwards of Rs 16,000 crore annually. This is a huge amount of money that can finance large and even globally powerful mafias, not to mention two-bit gangsters like the ones who killed Mr Sonawane. There was a time when Mumbai was in the grip of smugglers. With some simple policy steps like lower tarrifs, liberalization of gold imports and such like these all-powerful mafias were marginalized and largely confined to Bollywood movies.

Death by policy

Between the Reserve Bank of India, the Union finance ministry and the army of economic advisors that surround Prime Minister Manmohan Singh no one seems to have a clue about how to get a grip over food inflation. Not only has the recent episode of high food prices seen surprisingly sharp spikes in the prices of vegetables and fruit but it has lasted longer than any other episode of inflation in recent memory. At the end of a long consultation earlier this month the prime minister reportedly said in exasperation that nobody seemed to know what to do! Apart from the usual mantras on the pursuit of supportive monetary and fiscal policies, the only other substantial idea forthcoming related to the reform and liberalization of agricultural product markets. Economists have expressed surprise that higher prices do not seem to be sending adequate market signals to the producer to increase supply.

Hunger for ideas

The political class mocked rapid economic growth in the days when it was 9.5 per cent annually. The rest of the world celebrated the fact that India had become the second-fastest growing economy (it is now down to fourth or fifth), but no one mentioned it at the Youth Congress jamboree in New Delhi earlier this week. Government ministers stopped trying long ago to create a climate in which reform could enjoy traction.

Now, inclusive non-growth

Private airlines, led by the financially ailing Kingfisher Airlines, have reportedly sought the government&rsquo;s permission for direct import of aviation turbine fuel to run their planes on domestic routes. Their argument in support of their plea is that inordinately high taxes levied by various state governments have made aviation turbine fuel 50 per cent more expensive in India than abroad.

Flawed fare strategy

Few laws can claim to be as comprehensive and far-reaching in their sweep as the revised Companies Bill, 2011, which the Union Cabinet approved last week. It is supposed to be tabled during the winter session; if Parliament manages to find time to consider and approve it, then India Inc&rsquo;s long wait &ndash; almost 18 years &ndash; for a new law governing companies should finally be over. Many would, no doubt, like to believe that this inordinately long wait has been worth it.

Two steps forward, one back

Opinion is building up within the government against telecom companies that have allowed intra-circle roaming for third generation or 3G services. Essentially, under this arrangement, companies that don&rsquo;t have 3G spectrum can hire it from those that do. The Telecom Regulatory Authority of India, the law ministry and some wings of the Department of Telecommunications or DoT want these agreements to be declared illegal, arguing that the licence agreements do not allow such sharing of spectrum. Since the spectrum was given to companies so that they could roll out their 3G services, the renting out of spectrum by the telecom companies has caused a revenue loss to the government, they insist, though nobody has as yet tried to quantify that loss.

Much ado about nothing

Middle-class Indian households have traditionally been abstemious when it comes to running up debt. This has usually been viewed as both a safety valve and a symptom. Why a symptom? Because the low level of household debt could mean that middle-class Indians are unable to access formal credit at suitable rates &mdash; which in turn indicates the continuing shallowness of the banking system. And it is certainly a safety valve, in that any macro problems with debt caused by irresponsibility from the state or from large institutional or corporate borrowers will not be exacerbated by high levels of personal debt among India&rsquo;s citizens. Recent data from the Reserve Bank of India on the sectoral break-up of bank lending, however, should cause us to wonder how long these beliefs should hold.

Holding all the cards

Reliance Industries Limited (RIL) has said it has instituted arbitration proceedings with the government over profit-sharing from its premier natural gas block, KG-D6 (Krishna Godavari Dhirubhai 6). Further delays in expanding access to the KG basin&rsquo;s natural gas resources are a sign of how much things have changed in the years since 2009, when production began at KG-D6. Then, it was seen as a paradigm shift; big investments were announced in pipelines and power plants; fertiliser companies were assured feedstock; city gas networks were bid out; and transport corporations bought green buses. It is now becoming clear that that was a false dawn indeed. Today, KG-D6 produces 43 mmscmd against a projected 70-80 mmscmd. Yes, the induction of British Petroleum and an initiative to develop satellite fields could boost production; but not before 2014, at the least. And meanwhile, downstream investments are slowing, and under-utilised.

The problems with pipelines

The Insurance Regulatory and Development Authority (Irda) has released an alarmingly stringent set of regulations that could, bluntly, force Web insurance aggregators out of business, when they come into force in February 2012. At the very least, these guidelines will mute Web-based dissemination of information about insurance schemes and, probably, vitiate the Internet&rsquo;s effectiveness as a cost-effective channel for insurance products. Web aggregators are independent entities that carry details of various schemes from multiple insurers on their websites. They offer tools and calculators that allow surfers to compare schemes, and often carry opinionated analyses as well. There are several revenue streams. One is the click-through advertisement model, which translates into around Rs 10/click. A second stream is lead generation. The aggregators collect databases of contact information and share this with insurers.

An online licence raj

If the decision to liberalise foreign direct investment, or FDI, in the retail sector was supposed to dissipate the widespread feeling that policy-making and governance have become paralysed under the second United Progressive Alliance (UPA) government, then it has quite spectacularly failed to accomplish that task.

UPA-II: Reform or perish

Vladimir Putin may have discovered that there is nothing like a relatively free election to bring authoritarian rulers down to earth. The results of several exit polls for the 450-seat Duma elections suggest that his ruling United Russia party will get less than half the votes. Of course, that still gives Mr Putin&rsquo;s party a formidable lead over his rivals. But the fact that United Russia&rsquo;s lead has fallen from the substantial 64.3 per cent it received in the 2007 election must come as a reality check, since the elections to the lower house of Parliament were largely seen as a test of Mr Putin&rsquo;s strength. The results may be doubly troubling for the former KGB officer &ndash; who has developed a global reputation for a resiliently thick-skinned political amorality and a curious predilection for physical sport &ndash; because he has thrown his hat in the ring for a third and potentially fourth term in the upcoming presidential elections in March.

Putin's reckoning

As December 16 approaches, the date the Reserve Bank of India (RBI) is due to release its mid-quarterly review of monetary policy, there are two recent numbers that loom ever larger. The first is 6.9 per cent. That is the rate at which the Indian economy grew in the quarter between July and September, according to figures the Central Statistical Organisation released last week; the dip below seven per cent could have been expected, but still served as a stiff reminder. The second is eight per cent, the most recent year-on-year estimate from the commerce ministry of how much food prices have been growing. After a long stretch of double-digit numbers for food inflation leading into November, its sharp decline &ndash; a percentage point a week since Diwali &ndash; should perhaps cause the RBI to look anew at its resolutely hawkish policy stance.

Change policy stance

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